For ViewSonic Chief, Constant Monitoring Pays Off

James Chu looked at the personal computer business a decade ago and predicted that consumers would be more interested in the visual part of the PC than in the silicon innards tucked inside beige plastic boxes.

He bet his company on that vision, and today ViewSonic Corp. is the fifth-largest seller of computer monitors in the country. After moving nearly 2.5 million display devices last year, Walnut-based ViewSonic ranks behind only Dell Computer Corp., Compaq Computer Corp., Gateway Inc. and Hewlett-Packard Co.--companies that make automatic monitor sales whenever they sell a PC.

For Chairman and Chief Executive Chu, the next logical step is to add simple PC functions to his company’s monitors and turn them into Internet appliances, the next big thing in computing.

ViewSonic’s first new product, a phone with a touch-sensitive screen and Web browsing capabilities, is due to hit the market this fall with a price tag between $300 and $800. A bevy of other Net appliances, ranging from so-called wireless Web pads to portable DVD home theaters, are slated to follow. By the end of next year, ViewSonic expects Net appliances to account for 15% of the privately held company’s revenue, which topped $1 billion last year.

ViewSonic’s bread and butter is still a line of 30 traditional cathode-ray-tube monitors that sell for between $260 and $1,000 apiece in computer superstores like Fry’s and CompUSA, in catalogs, online and through reseller channels. Roughly half are sold to corporate customers, the rest to consumers.

But computer monitor prices have plummeted in the last two years, forcing some companies to exit the U.S. market. Prices for standard 17-inch monitors dropped 30% last year, which means ViewSonic has to boost unit sales by at least that much just to stay even.

With his foray into Web appliances, Chu, 43, sees an opportunity for ViewSonic to rake in monthly fees for services like Internet access in addition to one-time revenue from product sales. “Overall, this can give the company a huge, huge profit margin,” he said.

Chu had considered adding computer-like devices to his company’s product line before but concluded it wasn’t worth it to compete against Dell, Compaq and Gateway.

His attitude changed three years ago, however, when Oracle Corp.’s Larry Ellison and Sun Microsystems Inc.’s Scott McNealy began talking about network computers--relatively dumb, inexpensive boxes that would rely on the Internet for most of their information and applications. A network computer, Chu reasoned, was essentially a computer monitor with some PC chips thrown in. What’s more, there aren’t any companies that already dominate the fledgling industry.

So Chu set up a WebSonic subsidiary in the Bay Area to experiment with so-called smart displays.

Its first product is a 5-pound Web phone with a 6 1/4-by-3 3/4-inch color screen. A simple press of a button causes the phone to dial in to an Internet service provider, and the e-mail indicator light alerts users to waiting messages. Users can navigate on-screen menus by tapping icons with a pen-like stylus. With two lines, the phone can accommodate conversations and Web surfing simultaneously.

“A lot of people today don’t have a PC and they don’t want a PC,” Chu said. “But they still want equipment to access the Internet. They want e-mail and that’s it.”

Analysts predict consumers could ultimately buy as many Net appliances as PCs and cellular phones combined--as many as 600 million by 2002. Companies ranging from America Online Inc. and Intel Corp. to Sears, Roebuck & Co. and Swatch Group are developing products like Web phones, computerized refrigerators and watches that receive data from the Internet.

In addition to the Web phone, ViewSonic is working on several other devices, including a wireless “Web pad” about the size of an 8 1/2-by-11-inch note pad that would sell for about $1,500; a personal home theater that could play MP3 music files and DVDs for between $600 and $900; and a next-generation Web phone that would allow for “video chat,” said Peter Weedfald, executive vice president for marketing and business strategies.

“Our business is to be the leader in visual technology and communication,” he said. “An Internet appliance is just a flat-panel display with a keyboard.”

Chu isn’t counting on Net appliances alone to rescue ViewSonic from the monitor industry’s current doldrums. The Asian economic crisis of 1997 forced the Taiwanese makers of computer components that supply companies like ViewSonic to shed inventory to raise cash, causing prices to plummet. That, in turn, drove down monitor prices. Even if monitor firms maintained their profit margins, they still had to boost sales dramatically to keep profits growing.

While those conditions chased some monitor rivals out of the market, Chu saw the tough climate as an opportunity. With competitors weakened, Chu maintained spending on marketing and customer service to boost ViewSonic’s brand. And as ViewSonic thrived, its competitors weakened, including the monitor division of Finnish cell-phone maker Nokia Corp. ViewSonic acquired the unit in January to increase its presence in Europe.

“The time to invest is while the industry is down,” Chu said. “If we can gain more market share then, five years from now we’ll really be sitting at a very, very good position.”

Chu expects the average selling price for ViewSonic products to grow over the next five years. Part of the increase will come from selling more of its pricier flat-screen liquid-crystal displays, which generally go for between $850 and $3,300 and accounted for 14% of total sales last year. The convergence of PCs and TVs is also in ViewSonic’s favor. Television screens today don’t have high enough resolution to display text, but computer monitors can process television signals just fine.

“He knows what the market trend is, so he can bring in the right product at the right time,” said Jackson Lan, founder of the Industry-based retail chain PC Club, where ViewSonic monitors are a popular item.

Chu got his start in the computer field in 1983, when he landed a sales job with Behavior Technology Corp., a Taiwanese firm that manufactures computer keyboards. BTC sent Chu to Silicon Valley in 1986 to launch a branch office in the U.S., but within a year he was frustrated by the company’s propensity for building flashy products without regard to whether customers wanted to buy them, he said.

So in 1987, Chu and his wife moved to Southern California and launched Keypoint Technology Corp. with $50,000 in savings and another $50,000 borrowed from relatives. His first product was a computer keyboard made by BTC. Within a year, Keypoint branched out into other PC components, like floppy-disk drives, computer cases and switching power supplies.

Keypoint was one of dozens of firms in the San Gabriel Valley that imported computer parts from Asia and resold them to manufacturers in the U.S. But by 1990 Chu began focusing on computer monitors, the product he felt customers could relate to best.

“The whole interface with the computer is the screen, the display,” said Chu. “It’s more important than the CPU [central processing unit]. I decided I wanted this space.”

Chu didn’t know much about monitor technology, but he recognized that the industry was producing cheap, low-tech tubes and expensive, high-quality units. He decided to target the middle of the market with well-made monitors that could be sold at affordable prices.

A key part of Chu’s strategy was to transform monitors from a commodity into a product that buyers would request by name. To make his monitors stand out, Chu selected a trio of garishly colored gouldian finches as the company logo, to underscore the vibrant colors and sharp resolution available on ViewSonic monitors.

“A lot of other computer brands look at volume and low price,” said Daniel Ho, president of the Southern California Chinese Computer Assn., which counts Chu as a member. “But ViewSonic didn’t do that. They really look into quality. They really listen to what customers want.”

By 1993, Keypoint had dropped all products except monitors and changed its name to ViewSonic. Last year, the company shipped 6.9% of the 36 million monitors delivered to U.S. customers last year, according to San Jose market researcher Stanford Resources. Still not satisfied, Chu logs on to the Internet several times a day to scour Web sites in search of customer feedback.

Though Chu is gratified by the positive reviews he finds, the complaints are far more valuable. Gripes about hard-to-use features prompt Chu to visit his 100-person engineering department, while grumbles about product shortages spur him to find out why shipments aren’t keeping up.

Some of ViewSonic’s most important customer feedback comes from product reviewers at trade magazines who dole out “Best Buy” and “Editor’s Choice” awards. While it’s common for manufacturers to send their products to reviewers, Chu is particularly aggressive in eliciting their comprehensive critiques. ViewSonic product managers are even instructed to “win the heart of an editor,” Chu said. And they do--so far the company has won more than 600 awards.